Shareholder ends lawsuit against IBM over China risks, NSA scandal

Reuters Staff

3 Min Read

The sign at the IBM facility near Boulder, Colorado is seen with the Boulder Flatiron mountains in the background, September 8, 2009. REUTERS/Rick Wilking

NEW YORK (Reuters) - An IBM Corp shareholder has voluntarily ended a lawsuit accusing the company of concealing how its cooperation with a National Security Agency spying program cost it business in China and led to a nearly $13 billion plunge in the company’s market value.

The dismissal follows “an extensive additional investigation into the matters alleged, which included investigations conducted in the United States and China, as well as information obtained through discussions with defense counsel,” John Browne, a lawyer for lead plaintiff Louisiana Sheriffs’ Pension & Relief Fund in Baton Rouge, said in a letter made public on Monday.

It was not immediately clear what the investigation uncovered or what the information contained. Browne, a partner at Bernstein, Litowitz, Berger & Grossmann, declined to comment.

IBM shares fell 6.4 percent last October 17, wiping out $12.9 billion of market value, a day after the company posted disappointing quarterly revenue, including drops in China of 22 percent in sales and 40 percent in hardware sales.

According to the complaint, IBM lobbied Congress to pass a law letting it share the personal data of its customers in China with the NSA to help protect its intellectual property rights.

But after former NSA contractor Edward Snowden disclosed the agency’s “Prism” surveillance program, which used information from technology companies such as IBM, the company concealed how his disclosures caused Chinese businesses and China’s government to abruptly cut ties, the complaint said.

The lawsuit also named Chief Executive Virginia Rometty and former Chief Financial Officer Mark Loughridge as defendants.

In a statement on Monday, IBM spokesman Douglas Shelton said: “We said the complaint proceeded to make numerous specious and false accusations, and IBM called upon the law firm that filed this action to do the right thing and dismiss it. We are pleased that they have done the right thing.”

IBM’s full name is International Business Machines Corp.

The case is Louisiana Sheriffs’ Pension & Relief Fund v. International Business Machines Corp et al, U.S. District Court, Southern District of New York, No. 13-08818.